Future Supply Chain eyes PE funding to drive growth

MUMBAI | By Nandita Bose

MUMBAI Future Supply Chains, India's largest supply chain company, plans to raise a second round of private equity funding to diversify into new consumer-driven sectors as retail growth in the country shows signs of moderation.

The company, part of the Future Group, which runs the country's top retailer Pantaloon Retail PART.NS, earns most of its revenue providing services to affiliated companies such as the Big Bazaar hypermarket chain.

"Retail industry's expansion plans in the past 1-2 years have been witnessing a scale-down," Chief Executive Anshuman Singh told Reuters.

"So we identified drivers of growth in the consumer-driven sectors instead of focussing just on retail."

High inflation and interest rates have hurt consumer spending which alongwith a lack of funding and high real estate costs has hurt expansion plans of Indian retailers.

Expectations that India's capital-starved retail industry would get a boost from the entry of global chains such as Wal-Mart Stores Inc (WMT.N) and Carrefour (CARR.PA) were thwarted late last year when India backtracked on a plan to allow foreign supermarkets.

Future Group has had long-running talks about joining forces with Carrefour when the French giant enters the India market.

Future Supply Chains, which is looking to the consumer goods, autos and pharmaceuticals industries to power growth, hopes to finalise private equity funding in the next three months, Singh said, without giving details. It also plans to serve the burgeoning online commerce market.

The company plans to use the funds to invest 4 billion rupees to expand its warehouse capacity. In 2009, it received $30 million from Fung Capital, the private equity arm of Hong Kong-based supply chain giant Li & Fung Group (0494.HK).

The company hopes to earn between 50-60 percent of its revenues from external clients in 2012/13 from 40 percent now.

The supply chain industry is in its infancy in a country where cities can be thousands of miles apart, connected by pot-holed roads or creaking railways, and an estimated 30 percent of fresh produce spoils before it gets to market.

Big chains such as Wal-Mart have argued that they can invest heavily into supply chain infrastructure.

Singh downplayed any disappointment over the delay in foreign supermarkets entering India.

"Our business plans are independent of whether or not Walmart or Carrefour come in. If they do, we are prepared. But in the coming years, the share of retail in our growth will be very small," Singh said.

(Editing by Malini Menon and Tony Munroe)

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